Time to "Group Up"? Maybe, Maybe Not

David M. Brudney, ISHC, a nationally recognized spokesman for hotels and a veteran with four decades of experience, is the principal of David Brudney & Assoc. of Carlsbad, CA

David M. Brudney, ISHC, May 2002

All across America, operators are becoming more and more interested in group business.  Why?  Because far too many hotels and resorts have seen their core business - - commercial transient and leisure - - nearly disappear.

The past 18-month decline in commercial transient and leisure room nights has caused more and more hotels and resorts to take a new look at groups as a new and perhaps even safer core business.

Whether right or wrong, there appears to be a growing perception amongst hoteliers that group business is a more stable, recession-proof market segment, and given the current business cycle together with the ever-present threat of a 9/11 repeat, now’s the time to replace past dependency on business and leisure travelers.

Historically, groups account for nearly one-third of U.S. hotel and resort captured room nights but business mix numbers are changing today as more and more smaller, limited service hotels look to "group up" by becoming more proactive in the group market.

Good Reasons for Contemplating Groups

There are valid reasons behind this change in business mix shift.  After all, haven’t we seen enough over the past 12 months of significant declines in weekday business travelers and weekend leisure guests?  Innkeepers from Maine to Malibu and Savannah to Seattle have done everything possible to build back those two critical market segments.  Everything’s been tried: discounting to adding value, e.g., breakfast included, last night free, complimentary shuttle/limo service, upgrades, special promotions and more giveaways.  Frustrated, concerned over future demand, hungry to return to better days, operators are looking seriously now at trying their luck with groups.

Group business, the bread-and-butter of which being the 25 to 35 people, 15 to 20 room, 30 to 40 room night, midweek corporate groups, properly marketed and well-serviced, represent attractive benefits to be realized almost immediately:

• Warm bodies in the hotel are a wonderful sight! 
• Filling empty guestrooms no longer used by individual business travelers
• Catering and meeting room rentals represent incremental revenues
• Guaranteed payment (in most cases)
• Yielding and forecasting leveraged by advanced bookings
• Healthier operating margins
• Typically, staff needs to deal with only one single contact
• Master accounts replace individual folios.

A Word of Caution

A word of caution here is necessary.  Before owners and operators add that 5,000 square foot conference center, join the local convention & visitors bureau or run an expensive ad in one of the meetings trade publications, here are some things to consider first:

• Was group business not solicited by your property in the past due to physical limitations, demand or destination factors?
• Was the decision not to book groups an oversight or was it by design?
• Is there quantified demand for group business in the local market today?
• If so, is demand growing, flat or in decline?
• Which property (or properties) in the primary competitive set has the greatest market share of group business? 
• Why?  Best space?  Most space?  Rates?  Sales staff? Service?  Intangibles?  Combination or all of the above?
• Which property’s location, layout and condition are most conducive for groups?
• If the property is flagged, what specific resources does that brand have to offer insofar as driving group business?  Supporting property-level efforts?
• If the property is independent, what third party providers are qualified, affordable and available to produce group leads?  Group business direct?
• What capital improvements are necessary and/or desirable in order for the property to become more group-user-friendly? 
• What R.O.I. would be expected, required from capital improvements?
• What R.O.I. would be expected, required from additional sales and marketing expenditures (payroll, collateral, advertising, P.R., sales trips,  grand opening)?

More to It Than Capital Improvements and Sales and Marketing Expenditures

In order to make a successful, seamless transition from a commercial transient and leisure-dependent hotel to a more group-dependent hotel, much more will be required.

• Someone, most commonly the general manager, has to step forward to become the group house visionary, to set the tone, to help achieve "staff buy in," and to create a new, critical, long term group culture.
• Information such as rooming lists, billing instructions, meeting room setups, F&B guarantees, etc. must be recorded - - electronically or manually - - accurately and timely
• Telephone and walk-in inquiries must become high priorities.  Quick turnaround time is absolutely critical to any success
• Sales associates must accept the new group market challenge, sharpen selling skills, go to school on group demands and idiosyncrasies or risk being replaced by more experienced sales professionals
• Cross-selling of past and present client database, vendors, suppliers
• Broadcast throughout the hotel this property is now ready for groups - - on welcome marquee, staff badges, buttons, elevator cab display panels, signage, in-room TV infomercials, airport shuttles and check presenters
• All websites, collateral pieces, advertising, listings and alignments must reflect the new and real commitment to groups and group needs

Changes will have to be made.  One size does not fit all.  Test the waters, do some research, get some advisory help before you venture down that "group" road.  The advantages to having a solid group base are significant, but there are some hotels that simply cannot or should not be in the group business market.  Smart owners and operators need to know the difference.

About David Brudney & Associates

David M. Brudney, ISHC, is a veteran hospitality sales and marketing professional concluding his fourth decade of service to the hospitality industry. Brudney advises lodging owners, lenders, asset managers and operators on hotel sales and marketing "best practices" and conducts reviews of hospitality (as well as other industry) sales and marketing operations throughout the U.S. and overseas. The principal of David Brudney & Associates of Carlsbad, CA, a sales and marketing consulting firm specializing in the hospitality industry since 1979, Brudney is a frequent lecturer, instructor and speaker. He is a charter member of International Society of Hospitality Consultants. Previously, Brudney held hospitality sales and marketing positions with Hyatt, Westin and Marriott.

Contact:  David M. Brudney, ISHC, Principal
David Brudney & Associates
Carlsbad, CA 92009
Phone:  760-476-0830
Fax:  760-476-0860
Email David Brudney
Web Site:   www.DavidBrudney.com